Side by side
| Item | LLC | C-Corporation | S-Corporation |
|---|---|---|---|
| State fee to form | Set by each state: LLC table | Set by each state: corporation table | Same as a C-Corporation |
| Florida example, fee to form | $125 | $70 | $70 |
| Florida example, annual report | $138.75 | $150 | $150 |
| Owners | Members | Shareholders | Shareholders, with limits |
| Federal tax by default | Pass-through | Corporate tax, 21% | Pass-through, after an IRS election |
| Formalities | Few | Bylaws, board, minutes | Bylaws, board, minutes |
| Venture capital | Less common | Standard | Rarely: limits on shareholders and classes of stock |
| Foreign owners | Any structure | Allowed | Not allowed: non-US-resident individuals cannot own the stock |
When people commonly choose an LLC
- You run a service business, a store, a rental property or freelance work
- You want pass-through taxation and little paperwork
- You live outside the US and want a simple structure. See LLC for non-residents.
When people commonly choose a C-Corporation
- You plan to raise money from venture capital funds, which usually invest in C-Corporations
- You want to give stock options to employees
- You expect to keep profits in the company and reinvest them
- The owners live outside the US and want a corporation. Read what a C-Corp is.
An S-Corporation: a tax election, not a different company
An S-Corporation is a corporation that makes a federal tax election with the IRS (Form 2553) so its profits pass through to the shareholders. Coral Filings forms the corporation; you file Form 2553 yourself, and we do not file it for you. Individuals who are not US residents cannot own S-Corporation stock (IRC section 1361), so founders who live abroad usually choose an LLC or a C-Corporation. Read what an S-Corp is and ask a CPA before you choose.
Can I change later?
Often yes. An LLC can elect to be taxed as a corporation, and many states let an LLC convert into a corporation, with rules that differ by state. Many founders start with an LLC and convert when they raise capital. Decide with a CPA or attorney, because conversions have tax consequences.
How each is taxed at the federal level
- LLC: by default a one-member LLC is disregarded as separate from its owner for income tax, and an LLC with two or more members is classified as a partnership (IRS). An LLC can elect to be taxed as a corporation with Form 8832.
- C-Corporation: pays corporate income tax at 21% on its taxable income (IRS Publication 542).
- S-Corporation: to elect, Form 2553 is generally due no more than 2 months and 15 days after the beginning of the tax year the election takes effect. The corporation must be domestic, have no more than 100 shareholders, one class of stock and no nonresident alien shareholders (IRS instructions for Form 2553).
These are the published rules, not advice on which to choose. Ask a CPA. For the full guides, see what an LLC is, types of LLC and taxes when the owner lives abroad.
Where we form them
We form LLCs and corporations in the states with a confirmed fee. See LLC cost by state and corporation cost by state. For the Florida details, read how to start a corporation in Florida.
Frequently asked questions
Is an LLC or corporation better for a small business?
For most small businesses an LLC is simpler and has fewer formalities. The right choice depends on your plans and taxes, so confirm with a CPA.
Which is better for a foreign owner?
Many foreign owners choose an LLC for simplicity. A corporation owned by a non-US-resident individual is a C-Corporation, because individuals who are not US residents cannot own S-Corporation stock.
Does Coral Filings file the S-Corporation election?
No. We form the corporation. The owner files IRS Form 2553, ideally with a CPA's advice.
This page is general information, not legal or tax advice. For your specific situation, talk to a licensed attorney or CPA.